Over the past month and a half, Bitcoin has (BTC 0.53%) dominated the headlines. The world's largest cryptocurrency soared nearly 50% in a matter of weeks, eventually passing the $100,000 milestone and hitting a new all-time high of nearly $107,000. This kind of performance has rightly put Bitcoin on center stage. On the other hand, Ethereum is (Ethereum 0.54%)the second-largest cryptocurrency, has largely taken a backseat.
In fact, Ethereum's struggles defined much of 2024. At one point in October, Ethereum was up just 5% year-to-date, far below the explosive growth seen in Bitcoin and other cryptocurrencies. However, recent developments suggest that the tide may be turning. For investors, this is a unique opportunity to reevaluate Ethereum. Here are three reasons why 2025 could be Ethereum's time to shine, and why it's worth considering Ethereum over Bitcoin.
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1. Altcoin season may be approaching
One of the most exciting aspects of the cryptocurrency market is the phenomenon known as altcoin season. This is the period when alternative cryptocurrencies (altcoins) outperform Bitcoin as profits from Bitcoin begin to flow into the broader crypto market. So far this hasn't happened in the current cycle.
Bitcoin dominance, an indicator that measures Bitcoin's share of the overall cryptocurrency market, has been steadily rising for more than two years. This suggests that Bitcoin is gathering disproportionate value and altcoins like Ethereum are struggling to keep up.
However, recent data shows that Bitcoin's dominance has significantly reversed. While it hasn't fully materialized yet, a move of this magnitude hasn't occurred in over a year and could mark the beginning of an altcoin bull market. As the most widely recognized altcoin, Ethereum is expected to benefit greatly.
2. Growing interest in Ethereum ETFs
Another reason Ethereum could outperform in 2025 is the growing popularity of spot Ethereum exchange traded funds (ETFs). Approved in mid-2024, these instruments will allow institutional and retail investors to gain exposure to Ethereum through traditional stock markets. While the Bitcoin ETF was launched earlier and garnered a lot of attention, the Ethereum ETF has struggled to garner similar levels of interest.
But that narrative is starting to change. In early December, the Ethereum ETF posted its highest trading volume since its launch, briefly surpassing the trading volume of the Bitcoin ETF, a surprising achievement considering Ethereum's slow start. . This surge in activity reflects growing institutional interest in Ethereum as investors seek opportunities in the crypto market beyond Bitcoin.
If this trend continues to gain momentum, there could be significant buying pressure on Ethereum, especially as the broader crypto bull market matures and investors seek higher returns outside of Bitcoin.
3. Ethereum appears to be undervalued relative to its potential
The final reason to consider Ethereum is not necessarily in any particular data point or development, but in simple math.
While many cryptocurrencies are trading near or at all-time highs, Ethereum remains about 25% below its 2021 peak of $4,800. This gap presents an attractive opportunity for investors, especially given Ethereum's fundamental role in the crypto ecosystem. In my view, Ethereum has at least 25% upside potential from today.
However, given its fundamental role in cryptocurrencies and the history of cryptocurrencies hitting all-time highs during bull markets, there is room for further upside for cryptocurrencies.
That’s because Ethereum is the backbone of decentralized finance (DeFi), hosting over 55% of the sector’s total value. DeFi has the potential to revolutionize global finance by allowing users to engage in financial activities such as lending, borrowing, and trading without traditional intermediaries.
Additionally, Ethereum’s Layer 2 solutions are becoming more popular. They power millions of trades every day, further solidifying their dominance. While some argue that Layer 2 adoption is contributing to Ethereum's price lag, these solutions ultimately strengthen the network by increasing ease of use and adoption.
Last but not least, Ethereum also plays an important role in bridging traditional finance and decentralized finance. Major financial institutions such as BlackRock and UBS are leveraging the Ethereum blockchain to tokenize traditional assets such as money market funds. Tokenization is widely considered the future of financial markets, and Ethereum has emerged as the platform of choice for global financial giants.
Ethereum lawsuit against Bitcoin today
There appears to be further room for Bitcoin to rise to $100,000, but the higher price also increases its risk profile. Ethereum, on the other hand, offers an attractive alternative with a more favorable risk-reward balance at its current price.
Historically, Ethereum has lagged behind Bitcoin at the beginning of bull markets, only to see big gains during altcoin seasons. Ethereum struggled to catch up with Bitcoin last cycle, but once alt season arrived, it rose more than 600% in five months. If history at least holds its own, Ethereum could be poised for a similar breakout in 2025.
For investors looking to take advantage of a bull market, diversify their investments or find undervalued blue-chip cryptocurrencies, Ethereum stands out as a strong candidate. As capital flows into new areas of the crypto market, Ethereum could emerge not just as a complement to Bitcoin, but as a leader in its own right.
